Sorry if this has been covered elsewhere....

[Jimmy1963]

I am a dual US/Canadian citizen residing in the United States. A Canadian company, for which I have been doing consulting work over the past year, would like me to become an employee while still allowing me the flexibility of residing in the USA. I'll probably do 65% of the work from the US and the remainder from Canada (well within the 182 days rule).

My understanding of the tax implication is as follows: I would file a Canadian non-resident income tax return, essentially requesting that all Canadian income tax be refunded to me as a non-resident. I would also file my regular US tax returns and claim a large foreign tax credit. I realize that there might well be a cash flow problem as the US (federal and state) will want their tax dollars while I wait for the CRA to reimburse me.

Is this correct? I hate to bring this into the equation, but will the CRA expect to keep tax dollars collected for work performed in Canada? That's the part that I'm unclear on. Also, since they pay for my air travel and accommodations back and forth, is this taxable?

Thanks for any help that you might be able to provide. [b][/b]

[nelsona]

Look back at what you wrote: you are going to ask CRA for a full refund, and then claim the Cdn tax as a credit in US. Huh? What tax would you claim as a credit?

As an employee of a Cdn company, work done in Canada would be taxable in Canada unless it was for less than $10K total. The 183 day rule only applies to work done for a US employer, while temporarily in Canada, or self-employed contractors living in US and working temporarily in Canada -- not for your case.

So, you would pay Cdn tax on the Cdn portion, and US tax on ALL of it, and then claim the Cdn tax you paid as a credit.

That is the "problem" with becoming their employee. It is also a problem for the Cdn firm, as they would now have a US employee and would have to file a corporate tax return in US.

I think both of you are better off remaining in a consultant/client relationship. What is their reasoning for wanting to make you an employee.?


by the way, if you do pay Cdn tax, you take credit for the Cdn tax right on your US return, no need to file and then re-file after refund. So the tax owing to US would not be that much.